Posted inPolitics: National

The bigger hostage drama

The rescue of the American captain from pirates — handled with cool competence from President Obama to the SEAL snipers — gives the nation a much-needed boost. This comes after eight years of "bring 'em on" grandstanding by the Bush administration. And now, as the company that once stood for American success and the rising middle class, General Motors, faces bankruptcy. At least we can still do something right.

This should not distract us from piracy that has been happening on Wall Street, and that the Obama administration seems committed to, at best, merely applying a nip-and-tuck. It emerges that Obama chief economic adviser Larry Summers not only received $5.2 million from a hedge fund and $2.7 million in speaking fees from big financial institutions after he left Harvard. He also was working for a hedge fund while he was president of Harvard. Frank Rich asks, "Can he be a fair broker of the bailout when he so recently received
lavish compensation from some of its present and, no doubt, future
players?" Ben Stein answers, "I know people and I know money, at least the basics. If anyone thinks
that a man who has had a taste of honey from Wall Street on that scale
will ever really crack the whip on Wall Street, he’s dreaming."

Larry Summers, the man leading Obama's reckless push into socialism; sorry, SOCIALISM!! (or is it fascism? — the right-wingers can't figure it out). What's really happening is that the pirates are winning, and there's no SEAL team out of D.C. to protect taxpayers — or the future of this republic.

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The Madoff scandal: More than a Ponzi scheme

Were the damage not so great, it would be amusing to see SEC Chairman Chris Cox running around shocked, shocked, that Bernard Madoff had allegedly pulled off the biggest financial fraud in history — and the watchdog was again caught napping. Or worse. The agency ignored years of warnings about Madoff's activities, and Barron's did an article questioning his returns a decade ago. Madoff reportedly bragged about his influence in D.C., including having an in-law who worked for the SEC.

As the victims of the alleged scheme, including many charities, see their investments wiped out, Madoff is out on bond, having to wear an ankle bracelet and stay home. Had he been a minority/poor kid who stole $100 from a cash register drawer, he'd be in county lockup with hardened criminals. Meanwhile, Attorney General Michael Mukasey has recused himself from the investigation, without giving a reason. This is America in the new gilded age, where government has been essentially handed over to the wealthy and connected — and we're surprised they went wilding?

An older America learned from the frauds and follies of the 1920s, including the legendary collapse of the Samuel Insull monopoly. Regulation of securities and banks was put in place, helping to ensure the success of American business for decades through transparency, competition and fairness. That all began to unravel with the Reagan Revolution — but especially in the 1990s with deregulation pushed by Sen. Phil Gramm (R-UBS) and Clinton Treasury Secretary Robert Rubin, a kingpin from Goldman Sachs.

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This is Wall Street

As Republican nihilists carry out their war on working Americans, it's important to understand just how rotten is the industry they rushed to deregulate and bail out. And yes, there…
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Rebalancing our national portfolio

The rich are finally afraid. You can see it in their eyes. They're laying off their nannies. The smart ones are fleeing into Treasury notes, even though the yield is zero. According to the New York Times,

While this will lower the cost of borrowing for the United States
government, economists worry that a widespread hunkering-down could
have broader implications that could slow an economic recovery. If
investors remain reluctant to put money into stocks and corporate
bonds, that could choke off funds that businesses need to keep
financing their day-to-day operations.

Perhaps. But it might, just might, jolt Americans back to reality. That means an economy based on producing things of real value. And a re-valuation of business, which in this country means a re-evaluation of our very lives. It won't be easy, perhaps not even likely, because the dead hand of the past rests oh-so-heavy on everything we do. If it happened, however, it might just save us.

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The Paulson scheme

If you've ever wondered why these CEOs make hundreds of millions of dollars even if their companies are laying off thousands, their remaining employees have largely seen their paychecks stagnate and their stocks are circling the drain… If you've ever wondered whether you, or even the office boy, could have done a better job…consider the case of Henry M. Paulson Jr., the Secretary of the Treasury and former chief executive of Goldman Sachs. As is now becoming clear, Paulson has little more clue than the office boy about addressing the financial crisis.

After more than a year of denying the gathering storm, he suddenly rushed to Congress demanding an open-ended bailout of Wall Street, "to save the financial system." First the plan was to buy the "toxic debt" that had brought down much of the system. He was urged to inject capital directly into banks but rejected this advice. When the credit system seized up he changed the bailout to…inject capital directly into the banks. Yet the banks still refuse to do much lending, even as they use the taxpayers' money to buy competitors and pay fat compensation to their executives. Now the bailout has been changed yet again, to help "consumers." Well, not exactly: money would be given to companies dealing in credit cards, car loans and student loans. Don't expect any help personally.

Meanwhile, the real economy keeps spiraling downward as 401(k)s are vaporized, a million people have lost their jobs this year, the retail sector is moving into bankruptcy court and Detroit is facing collapse. This is one last gift of the Bush administration. Paulson's actions aren't incompetence on the level of Brownie — a political hack put in a critical position he for which he was completely unprepared. They may be worse.

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Steering the right course on the auto bailout

General Motors is running out of cash. Think about that. What was once the company that embodied American strength is running out of cash. Little wonder that Detroit is angling to get its own "rescue package" from Washington. We should do it — with serious strings attached.

Anyone who has lived in the Midwest can attest to the foundational nature of the auto industry to American manufacturing. It's not just the Big Three themselves, but the vast supply chain they have spawned, from steelmakers to precision machine tool companies to providers of all manner of parts. As we bail out a "financial services industry" that increasingly made little more than frauds and swindles, the auto industry, even heavily diminished from its former greatness, makes real products and is an essential prop of the middle class, particularly in the heartland. A hollowed-out economy can stand no more losses.

Yet the American industry is the author of many of its own problems. The decline of GM and its sisters began decades ago in an unholy alliance of complacency, greed and contempt for customers between management and labor leaders. Despite 20 years of plant closings and pledges of new days, the carmakers never really reformed. There's one exception: hundreds of thousands of union workers in the Big Three and parts makers lost their jobs — and communities their livelihood. Contrary to a persistent mythology, the decline since the early 1990s has been almost entirely the fault of management, not the United Auto Workers.

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Economics 101: Watch me fail to explain the crisis to the duhs and ignos

Commentators keep trying to explain the financial meltdown and subsequent bailout debate by using analogies that "average Americans" can understand. We hear such things as "imagine Wall Street was your kid that ate a big bag of candy and got sick, then wanted more candy," etc.

The problem is that the calamity is so bad partly because it is not simple. The venality behind it is something everyone should understand (and many "average Americans," with their get-rich-through-liar-loan-financed-rent-houses schemes participated in). But the essential mechanics and details of how we got here, and how the situation might be improved, are highly complex. This is a stark reminder of a danger facing us: America is saddled with one of the least informed electorates of an advanced nation, and one hardly as intelligent or engaged as their forebears who actually built the wealth in money, institutions and ideas that we are now rapidly throwing away. It shows the risk of the continued governance by "conservatism," which by its very nature can’t handle complexity.

Here’s an analogy for the bailout: triage, longer-term care and rehab. The paramedics and ER personnel need to identify those that can’t be saved and set them aside, while focusing on the most life-threatening cases where the patient can still be saved, leaving the less injured for later. But I can dumb it down no further. I can only add complicating factors. As in, the paramedics have tools that will have unpredictable effects not only on the patients but also on everyone in the world. The patients’ bodies are wired into everyone else in the world. And the medics are working on injuries they never trained for.

Simple enough? Of course not.

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Posted inPolitics: National

Let’s look at the fundamentals of the American economy

Republican John Sidney McCain III is trying desperately to back away from his "fundamentals of the economy are strong" line, even going so far as to say he meant American workers. But not so fast. In fact, it is the fundamentals of the American economy that are in dangerous trouble. Let us count the ways. I’m going to have to give you some straight talk, my friends:

1. Debt. The nation is deeply in hock to creditors worldwide. We used this line of credit to finance the housing bubble, wars in Iraq and Afghanistan, tax cuts to the richest Americans, rebate checks that went into the ether and the privatization of hundreds of billions of dollars in government services. It’s paying for the bailout of Bear, Sterns and it stands to take a devastating shock from Freddie and Fannie. From government to business to consumers, Americans are debtors, and most of the debt has been pissed away on war, sprawl, speculation and corruption, as opposed to building something for the future.

As the economist Nouriel Roubini has pointed out, the current account deficit in the ’90s came back as investment in private innovation, but for the past eight years it has been used to finance deficit spending and debt. Moreover, now much of this debt is held by nations that do not necessarily wish us well, including China and the petro-states such as Saudi Arabia.

This situation dangerously limits our options in foreign policy. It makes it a near certainty that living standards will take a big hit as we have to pay it back. Remember, when the Soviet Union collapsed, the first people in the door were the bankers, wanting to be repaid for the debt the Bolsheviks defaulted on after the 1917 revolution.

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Posted inPolitics: National

Making serious economic reform, part I

The candidates are giving speeches on the economy, ranging from Obama’s correct diagnosis that corporate political power has driven much destructive policy to Clinton’s programmatic wonkishness to McCain saying speculators should receive no federal bailout. Unfortunately, he means individuals who face foreclosure, not the big financial institutions that caused the housing and mortgage collapse.

The nation faces more economic challenges than at any time since the Great Depression. But overall America is so wealthy that the stresses and dangers are concealed; their most severe consequences may not be felt for decades. Nobody has all the answers, but I will lay down some markers to watch. These are based on history, the test of time and the reality of today’s economy. I wonder if the candidates will address them (we already know McCain’s answer)?

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Blond coed hooker Wall Street destroys economy

“How are you supposed to know? Fucking men like you built the hydrogen bomb. Men like you thought it up. You think you’re so creative. You don’t know what it’s like to really create something; to create a life; to feel it growing inside you. All you know how to create is death…and destruction.”

These are the lines Linda Hamilton speaks in Terminator 2. Change a few words and she could be speaking of the current financial disaster. Now it’s out of control. Make no mistake: the extraordinary steps by the Federal Reserve in the past few days, including a Sunday night fire sale of Bear Sterns and an interest rate cut, are being taken out of fear.

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Wishful-thinking stimulus

There’s a great deal of silliness and sophistry about the economy at this dangerous moment, but why should it be different from anything else in American life?

Washington debates a “stimulus” package of tax cuts and newspapers write headlines to tell “average readers” (whatever the hell that means) that the feds will put hundreds of dollars in their pockets. Wall Street does a dead-cat bounce and commentators who were darkly warning of recession are now talking about a miraculous comeback. In the New York Times, the normally sensible David Leonhardt was saddled with a headline that emblemized the silliness: “Worries That the Good Times Were Mostly a Mirage.”

In reality, the economy risks finally tipping over from a series of imbalances and forces long in the making. The Fed is very limited in its ability to right the ship. And any “stimulus” risks making things worse, aside from extending unemployment benefits, which is somehow anathema to “conservatives.”

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